Effective Oct. 28, 2004, the Check Clearing for the 21st Century Act (“the Act”) improved the ability of banks to use electronic images of paper checks by, for example, submitting those images, along with associated information, for electronic processing. Under the Act, if a receiving financial institution (“RI”) or its customer requires a paper check, a paper image replacement document (“IRD”), such as a paper “substitute check,” can be created from an electronic check image and associated electronic information. Such a substitute check meeting specified requirements is the legal equivalent of an original paper check, and an RI is required to accept the substitute check for payment. This process enables banks to reduce the costs and inconveniences associated with physically handling and transporting original paper checks.
Under the Act, the substitute check must be essentially an exact copy of the original paper check to be the legal equivalent of the original paper check. In particular, the substitute check must include an exact copy of all of the Magnetic Ink Character Recognition (“MICR”) data provided on the original paper check and all check endorsements.
The terms “check,” “substitute check,” and “IRD” generally are used interchangeably herein to refer to any electronic or paper document that can be used for electronic payment processing purposes, whether or not the document is the legal equivalent of a paper check negotiable instrument. The terms “bank,” “customer,” “RI,” and “processing entity” generally are used herein to refer to any party performing conventional or electronic check processing at any stage, including depositing and receiving institutions, their non-bank subsidiaries and affiliates, and any non-bank third party agents that provide processing services to banks.
Typically, a processing entity receives an electronic check for processing in an electronic image cash letter file (hereinafter an “ICL file”), which includes one or more electronic image cash letters (“ICLs”). Each ICL includes one or more electronic bundles of checks to be processed. Each bundle includes data for one or more checks. For a particular check, the ICL can include one or more electronic images of the check, the complete MICR data provided on the check, and additional financial data related to the check, such as endorsement information (hereinafter “addenda data”).
The ICL can further include a series of records related to the checks. For example, for each bundle of checks in the ICL, the ICL can include a bundle summary control record comprising information about the bundle, such as a bundle identification number, the number of checks in the bundle, the value of each of the checks in the bundle, and the total value of all the checks in the bundle. The ICL also can include an ICL control record comprising information about the origin and destination of the ICL, and a cash letter bundle summary control record comprising a summary of all the bundle summary control records in the ICL. The processing entity can process the ICL for payment and presentment. For example, the processing entity can present the checks in the ICL electronically or via printed paper IRDs.
Alternatively, the processing entity can receive a paper cash letter with one or more paper checks for processing. As with the ICLs, the processing entity can process information in the paper checks for payment and presentment. Certain exemplary methods for performing payment and presentment processing for electronic and paper checks are described in co-pending U.S. patent application Ser. No. 11/362,344, entitled “Cash Letter Print Streams With Audit Data” and U.S. patent application Ser. No. 11/362,343, entitled “Expanded Mass Data Sets for Electronic Check Processing,” the complete disclosures of which are hereby fully incorporated herein by reference.
Traditionally, processing entities process checks on a first in, first out basis. Thus, later-submitted, high value checks destined for presentment to preferred banks will be processed after earlier-submitted, low value checks destined for presentment to non-preferred banks. If processing volumes become heavier than expected or if certain system processes fail, then at least some of the later-submitted, high value checks may not be processed on time. Similarly, later-submitted checks requiring earlier output times than other, earlier-submitted checks may not be processed on time. For example, checks that will be presented as paper substitute checks generally require earlier output times than checks that will be presented electronically, because it takes longer to print and ship paper substitute checks than it does to transmit electronic data.
Therefore, a need exists in the art for a system and method for prioritizing checks for electronic check processing. In particular, a need exists in the art for a system and method for prioritizing checks for electronic check processing based on check characteristics, such as check values, receiving institutions associated with the checks, and/or delivery methods associated with the checks.